Did Minnesota’s gas utilities mishandle an epic natural gas price spike that’s costing Minnesota consumers $660 million?
That was the question Thursday before the Minnesota Public Utilities Commission (PUC), which is completing an investigation into the $660 million natural gas bill stemming from how they handled energy needs resulting from a February winter storm. 2021 in Texas.
The PUC has heard arguments about whether it should withhold at least $179 million in utility costs incurred after the storm inflamed natural gas prices in the Midwest. The PUC is expected to make a decision next week.
“The point here — and why this procedure is so difficult — is that the costs passed on to the people of Minnesota are truly unbearable,” said PUC President Katie Sieben.
The Minnesota Department of Commerce and the state Attorney General’s Office – which represent the public interest before the PUC – argue that the utilities mishandled the gas cost crisis and therefore the PUC will not should not allow them to collect the full $660 million.
CenterPoint Energy, the state’s largest gas utility, “had the tools to mitigate costs for consumers and didn’t use them,” said Katherine Hinderlie, assistant attorney general representing the Commerce Department.
She said the same about Xcel, the state’s second-largest gas supplier, and the Commerce Department made similar arguments in PUC filings regarding MERC and Great Plains Gas, other utilities. that are part of the investigation.
The gas companies said they were acting reasonably — given the information they had at the time of the storm — and following good utility practice.
“The vast dossier developed here shows that [CenterPoint’s] the stocks were cautious,” said Kristin Stastny, an attorney representing CenterPoint. Representatives of other utilities echoed these sentiments.
Wholesale gas prices in Minnesota hit all-time highs Feb. 13-17, 2021. As temperatures plunged in the nation’s gas production hub, unwinterized gas field equipment froze. Supply collapsed as demand soared.
Minnesota, like many states, allows utilities to pass fluctuations in wholesale gas prices directly to ratepayers. Many Minnesotans will pay 50% more than they pay annually on their heating bills just to cover gas costs from the storm.
Joseph Meyer of the AG’s office said the pass-through of costs allowed utilities to operate essentially as usual during the sharp price spike. “Do you think the utility would have behaved differently if it had been in charge of the expenses?”
Last year, the PUC enabled utilities to begin raising the $660 million over 27 months. The commission later extended the reimbursement period for CenterPoint customers to 63 months. Xcel’s residential customers got the same extension.
But the PUC investigation continued.
The Citizens Utility Board of Minnesota (CUB), a taxpayer advocacy group, is one group urging the PUC to reject the full refund of the $660 million.
CUB, along with the AG’s Bureau and Commerce Department, say utilities failed to pull enough gas from storage depots, miscalculated gas supply forecasts, and — for CenterPoint and Xcel – failed to make adequate use of emergency gas reserves known as peak plants.
Instead, utilities spent millions of dollars more than necessary to buy high-priced gas in an overheated spot market.
But two state administrative law judges this spring dismissed the watchdogs’ claims, saying utilities had acted “cautiously” in handling all aspects of soaring gas prices and should be given the all of the taxpayers’ $660 million.
These administrative law proceedings are organized to resolve contentious issues before the PUC. Utilities often cited the judges’ decision on Thursday to support their arguments.
The Commerce Department recommended that the PUC deny up to $179 million of $660 million.
The AG’s office recommended that all utility costs be disallowed, but other than that it supported the Department’s recommendations as well as the dismissals for the utilities’ allegedly faulty hedging practices.
Houston-based CenterPoint has the largest share of the gas tab: $409 million. Minneapolis-based Xcel has $179 million; MERC, a division of Milwaukee-based WEC Energy Group, $65 million; and Great Plains Gas, a small gas utility in western Minnesota, $8.8 million.
Xcel seems to have the most to lose from the PUC survey.
The Commerce Department wants the PUC to withhold up to $122 million — or 68% — of Xcel’s storm-related gas costs. This refusal would be 45 million dollars for CenterPoint; $10.7 million for MERC; and $845,000 for the Great Plains.
Just over half of Commerce’s recommended denials for Xcel related to the unavailability of its “peak” plants, which provide emergency gas supplies. The trade claims that Xcel should have used them during the price spike.
But Xcel’s largest state-of-the-art plant in Inver Grove Heights was shut down six weeks before the storm after it malfunctioned and two gas leaks. A cautious Xcel then closed two smaller peak factories.
Xcel “failed to carefully maintain” the Inver Grove Heights plant, Hinderlie said.
Xcel argues that it would not have used the peaking plants anyway because they are reserved for severe gas shortages, not a price crisis like the February storm.
CenterPoint used its peak plant during the February storm — but because of a gas supply squeeze, not because prices were high, the company said.
The Commerce Department said PUC should disallow $12.7 million in costs from CenterPoint because it did not sufficiently utilize its peak plant. The department rejects utility arguments that peaking plants should not be used during rate emergencies.